Pay-For-Performance Model Being Applied To Drug Makers In Europe

Armen Hareyan's picture

Prescription drug makers are creating pay-for-performance contractswith European state-run health care systems in an effort to "overcome"the systems' "increasing stinginess about paying for new drugs," the Wall Street Journal reports. According to the Journal,a rapid increase in drug prices over the past decade has increased thedemand on drug companies to be held accountable for the claims theymake.

In Europe, some government-run health systems haveestablished strict criteria for including drugs on their formularies,including reviews of cost effectiveness. If a health system decides notto pay for a treatment, the drug can effectively be locked out of themarket. The Journal reports, "That frugality has led toflat or declining sales in Europe for many drug companies." Drugcompanies are offering such pay-for-performance deals rather thanlowering drug prices "in part because they are fearful of settingprecedents that would cause insurance payers worldwide to demand pricecuts," according to the Journal.


For example, British officials last year declined to pay for the Johnson & Johnsonblood cancer drug Velcade because it was not determined to be costeffective. In response, J&J offered to reimburse the country'snational health service for treatments that were ineffective with cashor replacement doses. The deal is expected to begin later this month.France also has developed a pay-for-performance agreement with J&Jand the country's health care service said it has discussed such anagreement with GlaxoSmithKline.

However,such agreements have raised questions about how to determine whether adrug is ineffective in a patient and merits reimbursement. In the U.S.,Cigna and Aetna are pursuing pay-for-performance programs with drug makers.

Ed Pezalla, national medical director for Aetna Pharmacy Management,said, "I think there is definitely potential for (pay for performance)in the U.S. as pharmaceutical companies recognize they may want to takesome responsibility for the claims they make on their medications."

However, the Journalreports that it would be difficult to change U.S. pricing policiesbecause many drug companies already offer discounts and rebates basedon sales volume. Thom Stambaugh, chief pharmacy officer for Cigna, saidthe company has been asking cholesterol drug manufacturers to reimbursethe insurer if a patient taking the drugs correctly still has a heartattack. No drug maker has agreed to such a proposal. Stambaugh said,"We want them to put their money where their mouth is" (Whalen, Wall Street Journal, 10/11).

Reprinted with permission from Youcan view the entire Kaiser DailyHealth Policy Report, search the archives, and sign up for email deliveryat The Kaiser Daily Health Policy Report is published for, afree service of The Henry J. Kaiser Family Foundation.